Apprenticeship Funding
Content Who is this presentation for? Context to apprenticeship reforms What is the apprenticeship levy? Paying and using the levy What you can do now and next steps 2
Who is this presentation for? From April 2017 the way apprenticeships are funded is changing as part of a series of wider reforms to the apprenticeship system in England. Employers with a pay bill of more than £3m will be required to pay an apprenticeship levy. This will be paid to HMRC through the PAYE system. This presentation is designed to help schools and academies as employers …and employers are investing less in training Around the world, apprenticeships have long been recognised as a crucial way to develop the skills wanted by employers. That is why the Government is working with employers to increase the quality and quantity of apprenticeships in England. The Government’s commitment to 3 million apprenticeship starts by 2020 is a shared priority and all Government Departments are supporting an expansion of apprenticeship opportunities. 3 3
Action is needed to address current economic trends UK productivity lags behind other developed economies and employers are investing less in training. Meanwhile relative social mobility has stagnated or declined over recent decades. Apprenticeships contribute to Number of employees who worked fewer hours addressing these challenges than usual because they attended a training course away from their workplace …and employers are investing 200,000 That’s why the government is less in training committed to significantly 150,000 increasing the quantity and 100,000 quality of apprenticeships in 50,000 England and achieving 3 million 0 starts by 2020. 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Apprenticeships provide good economic returns, but there are not enough of them to meet demand or fill skills gaps in the economy. We also need to continue to drive up the quality of apprenticeship training and ensure that anyone completing an apprenticeship is fully competent in their occupation. To support this government is changing the way apprenticeship are funded from April 2017 4 4
What is an apprenticeship Apprenticeships combine practical training in a job with study. Apprenticeships are available at all levels from intermediate (level 2) to degree (level 6 & 7). There are rules governing what an apprenticeship is. The main ones are: • the apprentice must be employed in a real job; • they may be an existing employee or a new hire. They can be full or part time …and employers are investing employees. less in training • the apprentice must work towards achieving an approved apprenticeship standard or apprenticeship framework • the apprenticeship training must last at least 12 months • the apprentice must spend at least 20% of their time on off-the-job training • They must be paid the relevant national minimum wage Employing an apprentice is very simple. The National Apprenticeship Service can provide all the information you need to know in order to employ an apprentice 5 5
Types of apprenticeship There are currently two types of apprenticeship, new apprenticeship standards and the older style apprenticeship frameworks. Apprenticeship standards Apprenticeship standards are developed by employer groups known as ‘Trailblazers’. Standards show the core knowledge, skills and behaviours need to be fully competent in a well-recognised occupation. Each apprenticeship standard also has an assessment plan produced by the ‘Trailblazers’ Apprenticeship frameworks Apprenticeship frameworks are the older style of apprenticeship and are used by colleges, employers and training providers to make sure that all apprenticeship programmes are delivered consistently and to national standards Apprenticeship standards will replace all frameworks by 2020 6
Apprenticeship funding in England from May 2017: How the funding changes, including the levy, work
What is the apprenticeship levy and who pays it? Starts on 6 April 2017, at a rate of 0.5% of pay bill, paid through PAYE Applies to all UK employers in all sectors, including education £15,000 allowance is not a cash payment 8
Paying the levy • Employers pay their levy to HMRC, through the PAYE process • Single employers with multiple PAYE schemes will only have one allowance. • Connected employers share one allowance LEVIED EMPLOYER NON-LEVIED EMPLOYER • • Employer of 100 employees , each Employer of 250 employees , each with a gross salary of £20,000. with a gross salary of £20,000. • • Pay bill: 100 x £20,000 = £2,000,000 Pay bill: 250 x £20,000 = £5,000,000 • • Levy sum: 0.5% x £2,000,000 = Levy sum: 0.5% x £5,000,000 = £25,000 £10,000 • • Allowance: £10,000 - £15,000 = Allowance: £25,000 - £15,000 = £0 annual levy payment £10,000 annual levy payment 9
Paying the levy - What this means for schools The schools sector has a wide variety of arrangements in place, but there are no exceptions for apprenticeship levy liability. However, the type of school affects who is considered to be the employer for the purposes of the levy , and so who actually accrues the levy liability varies between set-ups. Each school or local authority should assess themselves for liability – the onus is on the employer to ensure that they comply with the legal requirements set out in the Finance Act. The following information does not constitute tax advice and individual schools and local authorities should seek appropriate professional advice to confirm their individual circumstances. 10
Paying the levy - What this means for schools The different set-ups of schools, means that there are likely to be differences in approach to paying the levy. The models below assume that the payroll and relationship between “parent” organisations (local authorities or MATs) and ‘child organisations’ (e.g. community schools or academies in a MAT) are typical. Schools where the local authority is the employer Where a school is a community school maintained by the local authority, the local authority is generally the employer. It is the LA who has the responsibility to pay ‘employer’ Class 1 secondary National Insurance contributions (NICs) on the earnings of the school staff, and so these earnings will be considered as part of the LA’s pay bill for levy liability calculation. Here the LA gets the £15,000 allowance. This is also the likely model where the school is Voluntary Controlled 11
Paying the levy - What this means for schools Schools where the local authority is not the employer Standalone academies. With an academy, the trust of the academy is generally the employer with the responsibility to pay Class 1 secondary NICs. They will therefore accrue levy liability based on the pay bill of the academy. They will have one £15,000 allowance. Academies that are part of multi-academy trusts. Multi-academy trusts (MATs) encompass multiple academies. In a MAT, it is generally the MAT itself that is the employer of the staff at any academies that are encompassed by it. This means that it is the MAT that accrues the levy liability based on the pay bill of all the academies, and gets one £15,000 allowance to offset against its liability. Foundation schools and Voluntary Aided Schools. Foundation schools and Voluntary Aided Schools generally employ their staff in the same way as academies, i.e. the governing body is considered to be the employer for the purposes of Class 1 secondary NICs. Therefore they will accrue and pay levy liability based on their own pay bill. They will have one £15,000 allowance 12
Accessing levy funds to spend on training • Levy funds will be available through a new apprenticeship service on gov.uk • First funds appear in apprenticeship service account in late May 2017 How funds in the account will be calculated If 100% of pay bill is in England 100% of levy payment in account If 80% of pay bill is in England 80% of levy payment in account • 10% government top up to monthly funds entering an account 13
Accessing levy funding - What this means for schools Once the body that is the employer has declared the levy to HMRC, it will be able to access funding for apprenticeships through a new apprenticeship service account. • When they have registered, the employer needs to verify their PAYE scheme/s and link them to their apprenticeship service account. • If they have more than one PAYE scheme, they can link them together if they wish, or will be able to use more than one account if they would like to keep their schemes separate, e.g. if schools are on different PAYE schemes from other parts of an employer. • It is only possible to have more than one apprenticeship service account if there is more than one PAYE scheme Schools where the local authority is the employer As the school does not own the PAYE scheme the employees it administers are on, the local authority that owns the scheme will have control of the funds. The school should talk to the scheme owner about accessing the funds. Schools where the local authority is not the employer If a school does not own the PAYE scheme the employees it administers are on the organisation that owns the scheme, such as the Multi Academy Trust, will have control of the funds. The school should talk to the scheme owner about accessing the funds. 14
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